With the economy the way it is, refinancing your house is one way to help reduce your bills and get rid of some debt. I refinanced my house successfully less than a year ago and am very happy with my decision.
Buying the house
After I filed for divorce in 2002, my children and I lived in a two-bedroom townhouse in Martinsville, Ind. My daughter and I were sharing a bedroom. I felt cramped up since there wasn’t much storage or much room for furniture. I was ready to have my own house and wanted each of the children to have their own bedrooms.
In May 2005 I bought a small house for my two children, ages five and eight at the time, and me in a quiet east side subdivision across town. This 990 square foot house is the perfect size for the three of us. We each have our own bedroom. I can put my car in a garage. We have plenty of room for furniture and plenty of storage. Even once the children move out, the house will still be perfect for me.
When I bought the house, I obtained a 40-year, 7/1 adjustable rate mortgage loan. My interest rate was 6.25%, which I didn’t think was too bad. My only concern was the type of loan. I really didn’t want an adjustable rate loan, but with my income I was just glad I could afford the house. I knew I would have to refinance before the seven years ended.
Two years ago I tried to refinance to not only get rid of the adjustable rate loan but to get rid of my substantial credit card debt. The bank where I had my loan informed me that I couldn’t. I was beginning to worry a bit about this. I didn’t want my interest rate to increase.
Last fall I tried a different bank and had no problem obtaining the loan I desired. I refinanced my house for a 30-year fixed rate loan at an interest rate of 4.375%. With this loan I was able to get extra money to pay off my credit card debt. I was so excited!
My house payment only dropped $20. However, I was free from my credit card debt. I lowered my interest rate by almost two percentage points. Most importantly, I got the fixed rate I had wanted from the beginning. I no longer had to worry about what the adjustable rate mortgage loan would do.
The refinance process wasn’t too difficult. I spent an hour filling out a loan application. I paid for an appraisal of my house, which happened within a couple of weeks of the application. The appraisal was the only out of pocket expense I had. I was able to include the closing costs in the refinance. I closed on my loan within a month of the application. At the closing I did sign quite a few papers. However, the whole process was relatively quick and painless.
With the success of my own refinance, I would encourage others to do the same. The interest rates are still as low, or even lower, than when I did it almost a year ago. The process is easy and well worth it.